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Technology Stocks : Newbridge Networks -- Ignore unavailable to you. Want to Upgrade?

To: Tim Luke who wrote (15577)	12/9/1999 10:59:00 PM
From: Ian@SI	Read Replies (1) \| Respond to of 18016

05:58 PM ET 12/08/99 Canada's Newbridge nails test time for new gear By Susan Taylor OTTAWA, Dec 8 (Reuters) - Canadian network gear firm Newbridge Networks Corp. is shipping a crucial new high-speed switch for customer testing this week, beating some analysts' expectations and breathing new hope into the troubled company. Ottawa-area based Newbridge, on takeover watch since revealing on November 18 that it was open to offers, confirmed on Wednesday that it will announce next week that its newest switch is being put through its paces by customers. Sources said San Antonio, Texas-based SBC Communications Inc. , the largest U.S. local phone company, and British Telecommunications Plc are testing the equipment. The timing is critical for Newbridge, which some analysts suggest is losing U.S. market share for its flagship Asynchronous Transfer Mode (ATM) technology to arch-rival Lucent Technologies Inc. . ATM technology sends multimedia data across networks at high speeds. Although the news does not lower the urgency for Newbridge to find a buyer, it does make the company a more attractive takeover candidate, analysts said. If Newbridge can quickly move its new 50-gigabit ATM switch -- which will be the swiftest on the market -- from testing to general availability, the company could gain an important advantage over competitors. The switch has a capacity of 50 billion bits of data per second, dramatically outpacing the closest competitors which have 25-gigabit switches. "We are now expecting them to ship over a dozen switches for revenue recognition in test networks by the end of the quarter," said Rob MacLellan, analyst at CT Securities in Toronto. The sales would likely amount to less than C$10 million for the quarter which closes on January 31, he added. "Our feeling was that we wouldn't see any additional revenue recognition on the switch until next quarter," MacLellan said. "So it looks like there is very significant underlying demand." Analysts began asking last month if Newbridge could hit its target to start trials in late November. Doubts grew when the head of switching products left Newbridge soon after the November 2 departure of President Alan Lutz. Testing now will be seen by the market as a home run for Newbridge, which has suffered several recent strike-outs. "Having the switch released and having revenue recognition, albeit a very modest amount, effectively one quarter earlier than expected, is a nice boost to people that may have had some doubts of whether the switch was real or not," MacLellan said. The new product is seen as an important kick start to sales, which were hit with the firm's sixth earnings warning in 10 quarters on November 2. Since then, the company has moved to cut costs to 36 percent of sales from 46 percent. Newbridge cut 700 jobs late last month. "We've aligned our resources to success," Newbridge's new President Pearse Flynn said during a press conference on November 24. "The U.S. market is demanding the bigger products faster, so I want to get these products out as fast as I can." Newbridge's 50-gigabit switch would beat ATM gear from competitors including Nortel Networks Corp, , Cisco Systems Inc. and Lucent. "The faster that switch hits the market with some momentum, the faster they can offset the slowdown in sales in the existing 36170 switch and thereby maybe boost their bottom line ahead of expectations for next year," MacLellan said. ($1=$1.48 Canadian) ((Susan Taylor, Reuters Ottawa Newsroom